The Australian government is implementing several changes to superannuation starting from the 2024-25 financial year, aimed at helping Australians boost their retirement savings. These changes apply to all super fund members, including those with self-managed super funds (SMSFs). If fully utilised, these changes can significantly increase the amount individuals can contribute to their superannuation accounts.
Key Superannuation Changes
- Increase in Superannuation Guarantee (SG) Rate
The compulsory SG rate, which employers pay into their employees’ superannuation, will rise by 0.5% from 11% to 11.5% of ordinary time earnings. This rate will increase again to 12% on 1 July 2025. - Higher Concessional Contributions Cap
The concessional (before-tax) contributions cap will increase from $27,500 to $30,000 per financial year. Concessional contributions, which are taxed at a flat rate of 15%, include employer contributions and any personal contributions made through salary sacrifice. Individuals with existing salary sacrifice arrangements should review their contributions to take advantage of the higher cap. Contributions are typically set as a percentage of salary or as a fixed dollar amount, deducted from pre-tax salary. - Increased Non-Concessional Contributions Cap
The non-concessional (after-tax) contributions cap will rise by $10,000, increasing from $110,000 to $120,000 per financial year. This cap, like the concessional contributions cap, is indexed to average weekly ordinary time earnings (AWOTE). Consequently, the three-year bring-forward limit will also increase, allowing individuals to contribute up to $360,000 in one year. This change provides an opportunity to make substantial after-tax contributions, especially for those receiving large sums of money, such as from asset sales or inheritances. - Changes to Preservation Age
The minimum age required to access superannuation, either through an account-based pension or lump sum payments, will be set at 60. Once individuals reach the preservation age, amounts withdrawn from super are tax-free. - Transfer Balance Cap Remains Unchanged
The transfer balance cap, which limits the amount that can be transferred from a super account to a pension account where income payments and investment returns are generally tax-free, will remain at $1.9 million for the 2024-25 financial year. This cap is indexed to the consumer price index (CPI) and increases in $100,000 increments. Any amounts exceeding the $1.9 million cap must remain in a superannuation accumulation account, where investment earnings are taxed at 15%. Notably, the value of assets within a pension account can grow beyond the $1.9 million cap without penalties.
Summary
These superannuation changes, effective from 1 July 2024, are designed to enhance retirement savings opportunities for Australians. By increasing both the SG rate and contribution caps, and adjusting the preservation age, individuals have more flexibility and incentives to grow their retirement funds. Understanding and leveraging these changes can lead to more substantial retirement savings.
